EU Constitution – France Votes (III) What if it’s no?

Valéry Giscard d’Estaing, former president of France and father of Europe’s constitutional treaty, [was asked what] would happen if France – or any other core country – rejected the treaty. Calmly explaining that the constitution was a compromise forged in marathon talks among thousands of participants, Mr Giscard said it would be impossible to renegotiate such a document, especially as it had already been ratified by several countries. “We would have a crisis,” he concluded.

The possibility of just such a crisis crystallising in France has significantly increased in recent weeks, according to a batch of opinion polls. These have all shown that a narrow majority of voters is inclined to reject Mr Giscard’s beloved constitution in a national referendum on May 29, threatening to bring the European project juddering to a halt.

The public anger expressed in the opinion polls has thrown France’s political elite into a panic and dismayed the country’s European partners. How could France – described recently by José Manuel Barroso, the European Commission president, as one of Europe’s “indispensable” countries – threaten to smother its own political creation? What has gone awry with France, for decades the intellectual inspiration and the driving force behind Europe’s integration?

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Jean-Daniel Levy, head of research at CSA, a polling organisation, says French people used to see the EU as a means of spreading French values and influence outside France. But they have increasingly come to believe the reverse applies: that the EU has become a mechanism through which outside influences and values are imposed on France.

The second great difficulty bedevilling the Yes campaign is that their opponents are proving an elusive and effective enemy, refusing to be drawn into a battle on the government’s chosen ground. The Yes camp has been vainly trying to focus the debate on the functionality of Europe: is the EU better governed by the current Treaty of Nice or the constitution? But the No camp has been addressing almost every other worry in voters’ minds.

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Henri Emmanuelli, a firebrand of the old [Socialist] school, has been arguing that Brussels is part of the problem rather than the solution. The Commission, under the sway of the much-feared “Anglo-Saxon” liberals, is threatening to erode workers’ protections and accelerate the “delocalisation” of jobs to China, he says.

By contrast, the opposition right is chiefly animated by the possible admission of Turkey into the EU. (…) “Federal, ultra-liberal, Atlanticist – such is the Europe in which we have been living since Maastricht and such is the Europe that is being celebrated in this constitution,” [said Charles Pasqua, the Gaullist senator and former interior minister who opposed the Maastricht treaty of 1992 that paved the way for the euro].

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The debate points to a chasm between the French elite and the people, La France d’en haut and La France d’en bas.That distrust will surely be the dominant theme in French politics ahead of the presidential election in 2007, whatever the outcome of next month’s referendum.

“In this country, everything is imaginable; the French like to disobey.”

International investors are growing increasingly anxious that France will reject Europe’s constitutional treaty, a result that could knock the euro and unsettle financial markets in countries aspiring to European Union membership.

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Eric Chaney, chief European economist at Morgan Stanley, said that a No vote in France could hit the euro, increase the differentials in bond prices between European countries and increase the risk premiums demanded by investors in countries such as Turkey that are aspiring to EU membership.

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Not only could the outcome of the French referendum move the euro-dollar exchange rate, but it could also affect the currencies of countries outside the eurozone, such as the UK pound and the Turkish lira.

Tim Ash, emerging market analyst at Bear Stearns, said: “A No vote on the French referendum could complicate Turkey’s EU membership talks. The question would be: How can the EU continue to expand when its institutions are in doubt.”

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“If the French vote No, sterling could rise because pressure on the UK government to bring the country into the eurozone would ease,” said Mr Bloom [a currency strategist at HSBC].

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Christian de Boissieu, president of the Paris-based Council of Economic Analysis, a government advisory body, said that a No vote in France would raise a “big question mark over European political and economic governance” (…) but he doubted that the adverse effects on the euro would be long-lasting. “The fact that there is a No vote or a Yes vote will not impact on the US deficits, which are the main cause of the dollar weakness,” he said.

On May 29, France will hold a referendum on the European constitutional treaty. I believe the odds still favour ratification. But since the last five opinion polls before the weekend put the No vote ahead, it is perfectly legitimate to ask what would happen if the French voted this way.

One would have thought Europe’s political leaders had a contingency plan to deal with this kind of emergency. But, at least to my knowledge, no such plan exists. As one senior European Union official put it recently, the consequences of a French No vote were “too awful to contemplate”. As a result, few EU officials have contemplated them.

Under EU law, the constitution requires ratification from all 25 member states to come into effect. If even one country failed to ratify, the Treaty of Nice, the EU’s current legal framework, would remain in force.

Compared with a French Non, the consequences of a British No are almost trivial. In a much noted pamphlet, Charles Grantfrom the Centre for European Reform in London set out in great detail how a British No would trigger the formation of a coreEurope based around France and Germany.* This would leave the UK politically isolated. An EU without the UK is imaginable. An EU without France is not.

The French No campaign opposes the EU constitution for precisely the opposite reason to that of Britain’s eurosceptics. The French are fervent pro-Europeans, who believe that the EU is becoming too “Anglo-Saxon”. The now watered down services directive, which would have created a single market for services across the EU, became a symbol in the French debate of how Anglo-Saxon capitalism has corroded core European values. By destroying the treaty, French opponents of the constitution hope to drive the enlarged liberal EU into the ground and rebuild it as a much more integrated – and inward-looking – political grouping with France and Germany at its centre.

In this scenario, the EU would continue to exist. But since the voting rules of the Nice Treaty favour the formation of blocking minorities, such an EU is unlikely to be effective. Meanwhile, France, Germany, Spain and Belgium would join forces to create an informal grouping to co-ordinate foreign and economic policy. Membership would be by invitation only. It may not even be open to every country in the 12-nation eurozone.

If a French No were simply regarded as a vote of no-confidence in the EU in general, and in President Jacques Chirac in particular, the consequences would be even worse. There would be a political crisis in French domestic politics. Jean-Pierre Raffarin, the prime minister, would probably have to go the next day, so would François Hollande, the pro-constitution leader of the Socialists, a party deeply divided on this issue. The one person who is not going to resign is Mr Chirac himself.

The crisis would quickly engulf the whole EU. An immediate consequence of a No vote in any of these scenarios would be the indefinite postponement of enlargement talks with Turkey and Croatia. One of the rationales for the constitution was to prepare the EU for enlargement by reducing the threshold for a qualified majority. Turkey could then look forward to another 40 years of waiting in the EU’s antechamber.

None of these scenarios is particularly appealing. But there are not many realistic alternatives. The EU will not be able to renegotiate the constitutional treaty after a French or British No. Any changes acceptable to France are unlikely to be acceptable to the UK, and vice versa. This is also why a slimmed-down version of the constitution – for example, one that included only the new voting rules – would probably not find a majority.

Nor would it be possible to placate the naysayers by granting them “opt-outs” from certain areas of European integration. The Danes, for example, were allowed to opt out of the single currency after they rejected the Maastricht Treaty in a referendum. The constitutional treaty does not add policy areas; instead, it defines the fundamental rights of EU citizens and the workings of the institutions. There is nothing to opt out of, except for membership of the EU itself. This means that there exists no firm basis for a second referendum, except for a referendum on continued membership.

One suggestion I have heard is that the EU could decide to downgrade the constitution into a simple treaty revision – without changing its material content. There would be no renegotiations, except that it will not be called a constitution, but a treaty. The idea behind this is to persuade some countries to fast-track the ratification process through their national parliaments without the need to hold referendums. But such an approach would be fundamentally dishonest and undemocratic. If the French electorate reject this constitution they will, of course, be rejecting its content, not only its form.

This leaves us with two rather unpalatable options: a coreEurope in which the EU would remain little more than the shell of a single market; or an empty shell without a core. It is no wonder that some people find a French No vote “too awful to contemplate”.

* What happens if Britain votes No? www.cer.org.uk